China Equity Strategy A-Share Sentiment Edged up with Highe...-110205607

M Update China Equity Strategy | Asia PacificA-Share Sentiment Edged up with Higher Volume Morgan Stanley Asia Limited+Laura WangEquity Strategist Laura.Wang@morganstanley.com +852 2848-6853 Chloe LiuEquity Strategist Chloe.Liu1@morganstanley.com +852 2848-5497 Catherine ChenEquity Strategist Catherine.Chen@morganstanley.com +852 3963-4186 Exhibit 1 : MS A-share Sentiment Indicator (MSASI): 36% (weighted), up 3ppt vs. August 2815002000250030003500400045005000550060000%10%20%30%40%50%60%70%80%90%100%Jan-14Jun-14Nov-14Apr-15Sep-15Feb-16Jul-16Dec-16May-17Oct-17Mar-18Aug-18Jan-19Jun-19Nov-19Apr-20Sep-20Feb-21Jul-21Dec-21May-22Oct-22Mar-23Aug-23Jan-24Jun-24Nov-24MSASI (Simple)MSASI (Weighted)MSASI (Simple) CurrentMSASI (Weighted) CurrentCSI300 (RHS)75%20%=36%30% Source: CEIC, Bloomberg, Wind, RIMES, Morgan Stanley Research. Data as of September 4, 2024.Exhibit 2 : MSASI trajectory since January 1, 20192,8003,2003,6004,0004,4004,8005,2005,6006,0000%10%20%30%40%50%60%70%80%90%100%Dec-18Feb-19Apr-19Jun-19Aug-19Oct-19Dec-19Feb-20Apr-20Jun-20Aug-20Oct-20Dec-20Feb-21Apr-21Jun-21Aug-21Oct-21Dec-21Feb-22Apr-22Jun-22Aug-22Oct-22Dec-22Feb-23Apr-23Jun-23Aug-23Oct-23Dec-23Feb-24Apr-24Jun-24Aug-24Oct-24MSASI (Simple)MSASI (Weighted)MSASI (Simple) CurrentMSASI (Weighted) CurrentCSI 300 (RHS)30%36%MSASI was launched on 11 March, 2019 Source: CEIC, Bloomberg, Wind, RIMES, Morgan Stanley Research. Data as of September 4, 2024.The rebound in trading volume is likely due to media reports of a potential mortgage rate cut, in our view. Confirmation of this news and details of implementation will be crucial to gauge the real impact. Otherwise, sentiment may stay bumpy as more consensus earnings downward revisions take place. A-share investor sentiment edged up vs. prior week: Weighted and simple MSASIs increased by 3ppt and 2ppt to 36% and 30%, respectively, vs. prior cut-off date (August 28). Average daily turnover (ADT) for ChiNext, A-shares, Equity Futures and Northbound (August 29-September 4) increased by 22%, 29%, 33% and 35%, respectively, vs. the prior cycle (August 22-28). RSI-30D dropped by 1ppt vs. the prior cut-off date (August 28). As we expected, consensus earnings estimate downward revisions show early signs of reacceleration. Southbound net inflows continued for the 28th consecutive week (early Feb-24): Southbound saw net inflows of US$1.3bn during August 29-September 4, with YTD and MTD net inflows hitting US$60.3bn and US$1.4bn, respectively.*Note: As announced on July 26, 2024, by HKEX, Shanghai Stock Exchange and Shenzhen Stock Exchange, publishing of Northbound daily purchase and sale data was effectively terminated as of August 19, 2024. The last day for Northbound daily buy and sell data to be available is August 16, 2024. The market may remain range bound after the 2Q results season, with more downward revisions to consensus earnings and still-soft China August PMI: The rebound in turnover may be related to a Sep 4 Bloomber